Comparing Wise (Transferwise) vs. PayPal

As the global economy continues to grow, companies need a way to facilitate international payments. Cross-border and mass payment technologies enable organizations to operate overseas and expand into new markets. Businesses can now engage in global investments and hire international contractors from around the world.

Two platforms that offer accounts payable automation and optimize global partner payments are Wise and PayPal.

Wise vs PayPal: Overview

Wise (formerly known as TransferWise) and PayPal are both popular payment services that offer international money transfers. While PayPal is widely accepted online, Wise specializes in currency exchange. Both platforms enable you to send money to multiple countries, offering a variety of payment options.

Choosing between Wise and PayPal really depends on your specific needs, such as the nature of transactions, preferred payment methods, and whether a business prioritizes lower fees or broader integration.

There are some key differences between Transferwise vs PayPal. In this article, we’ll explore the top features, pricing, limitations, safety, and support, to help you decide which system works best for your business.

What is Wise (Transferwise)?

Wise, formerly known as Transferwise, is a global payments platform that facilitates international money transfers and currency exchange. Founded in 2011, Wise has continued to evolve into a widely recognized and trusted platform for businesses and individuals.

Wise operates on a peer-to-peer model, matching transfers between users who need to send money in opposite directions. By doing this, Wise avoids the need for traditional international bank transfers and drives faster, more cost-effective transactions.

The Wise payments platform serves millions of international customers and has become a trusted choice for global money transfer services and foreign currency exchange.

What Does Wise Do?

Wise is known for its strong user-centric approach, competitive exchange rates, and commitment to transparency. The platform allows companies to send and receive money internationally, as a cost-effective alternative to traditional banks. The system also facilitates currency exchange at competitive rates.

The Wise platform offers multi-currency accounts for a quicker transfer speed. Users can hold and manage money in multiple currencies, and take advantage of other services like mass payments, integrations, and APIs.

Known for transparency, Wise offers a real-time fee calculator. This allows users to see the exact fees and exchange rate upfront, ensuring total visibility and avoiding any hidden costs. The platform is accessible through the website and mobile apps (Apple and Android), where teams can track transfers, view exchange rates, and manage transactions, from anywhere in the world.

What are Wise’s Top Features for a Business?

Wise runs on a unique business model to send funds. Payers send money to the Wise account in their country, with a recipient address. Wise then sends the converted amount to payees from their account in the payee’s country. The money never actually crosses borders, so the fees only involve converting the funds.

The top features of the Wise platform include:

Low and Transparent Fees

One of the main attractions of Wise is cost-effectiveness. The Wise website has a fee calculator so a business knows exactly how much every transaction costs, prior to sending. There are no hidden fees anywhere. It’s one of the cheapest ways to send money, with companies saving up to 8x the fees.

Real Exchange Rate

Charges are also lower because money is sent at the mid-market rate (aka the real exchange rate) and doesn’t actually move across borders (i.e. no intermediary fees). There is a small flat fee + a percentage of the transfer amount. This ensures the customer always receives a fair and competitive exchange rate without hidden markups.

Multi-Currency Accounts

Wise offers multi-currency accounts, allowing users to hold and manage money in different currencies (like USD, EUR, GBP, and more). This is a particularly useful feature for companies that deal with international transactions.

Borderless accounts allow users to receive money in various currencies, hold balances, and send money using local banks. This provides greater flexibility and convenience for companies doing business on a global basis.

Easy Setup

Wise has a small learning curve and is easy to set up and use. It streamlines the payment experience and helps you create a centralized business account to make payouts via file upload or integrated API.

Regulatory Licenses

Wise has a US Money Transfer License (MTL) in all states except for Nevada. They also possess an MTL for Canada, Australia, Hong Kong, Japan, New Zealand, Singapore, and the UK.

Wise Pricing & Fees

When it comes to pricing and fees, Wise has some of the most transparent costs on the market.

If you’re comparing Transferwise fees vs PayPal, or other competitors like Transferwise vs Xoom or OFX vs Transferwise, you’ll find the most visibility with Wise. Pay international clients around the world with the real exchange rate and low conversion fees.

The platform will show a business the Wise fee and exchange rate upfront before you make any payments. The amount is fixed and depends on the currency and payment method.

Making a Transfer with Wise

To make a transfer with Wise, follow these general steps:

1. Create an Account: Sign up through the website or mobile app and connect your bank account.
2. Select Transfer Details: Choose the currencies you are sending from and to, and enter the amount you wish to transfer. Wise will display the estimated amount your recipient will receive.
3. Provide Recipient Details: Enter the recipient’s name, address, and bank account details. Double-check the accuracy to avoid any issues with the transfer.
4. Review and Confirm Data: Review the details of the transfer, including the fees, exchange rate, and estimated delivery time. Make any necessary adjustments or corrections needed.
5. Choose the Payment Method: Choose the preferred payment method. Wise supports a variety, like debit cards, bank transfers, and sometimes credit cards. It all depends on your country and the currency involved.
6. Verify Identity: In some cases, you may need to provide additional data or verify your identity to comply with regulatory requirements.
7. Track the Transfer: Once payment is confirmed, Wise will provide you with a tracking number and updates on the status and progress of the transfer.

Specific steps and options may vary depending on the country and currencies involved. You should also be mindful of any applicable fees, exchange rates, and transfer limits associated with your Wise account.

Is Wise Safe?

Wise is considered a safe and secure platform for international money transfers. The brand is authorized and regulated by various financial authorities in the countries where it operates. For example, in the UK, Wise is regulated by the Financial Conduct Authority (FCA).

Wise also employs robust security measures to protect customer information and transactions. This includes using encryption technology to secure transmissions, implementing multi-factor authentication for account access, and continuously monitoring for fraud.

The Wise brand operates as a licensed and regulated financial institution. They are required to maintain appropriate safeguards and comply with all know your customer (KYC) and anti-money laundering (AML) laws. The company has processed billions of dollars in transfers and has a strong reputation for reliability and customer satisfaction.

Wise Limitations

Just as any platform has advantages, there are also some limitations you can expect. Here are a few ways in which Wise falls behind the competition:

Mass Payments

Although Wise enables a business to send mass payments, there is a limit. You can only send 1,000 payments in a batch. So, if you have more payments than that, AP will have to prepare multiple files.

Payee Management

Wise doesn’t offer any features for payee onboarding and only sends remittance details for certain currencies. This means AP teams spend a lot of time answering inquiries and resolving payment issues. Everything related to working with new vendors is a manual process.

Tax Compliance

Wise doesn’t have any tax capabilities. You will have to rely on a consultant or other technology that is familiar with the regulations in the countries you are doing business in. There is no other way to verify if tax data is accurate.

Additional Limitations

• Only one payment method
• Limited countries and currencies
• No early payment options

Wise Support

Wise primarily operates digitally. Thus, the availability and response times of their support channels will vary based on factors like time zones and user demand. Support options include:

• Help Center: Includes a wealth of info like FAQs and articles
• Email Support: Wise promises to respond in a timely manner
• Chat Support: Live chat support accessible through website or mobile app
• Phone Support: In some cases, Wise provides phone support (depends on location)

Wise strives to provide efficient support for users, but it’s always recommended to check the website or contact the support team directly for the most up-to-date information about the product.

What is PayPal?

PayPal is a widely recognized online payment platform that enables a business to send and receive money electronically from across the world. Founded in 1998, it is one of the most trusted and popular digital payment systems on the planet. If you’re comparing PayPal vs Transferwise, which one is more reliable? For starters, PayPal has been around four times as long.

The PayPal brand is known for ease of use, simplicity, convenience, and widespread acceptance. It’s the prime choice for companies looking for a secure and reliable digital payment platform. For years, it has served as an electronic alternative to paper documents, checks, and money orders.

What Does PayPal Do?

How does PayPal work? PayPal is a digital payment platform that provides a variety of services related to online transactions and global money transfers. The platform enables users to securely make payments by linking their bank accounts, credit cards, or debit cards, to their PayPal accounts; using them as funding sources for transactions. PayPal becomes the intermediary between your personal account and the recipient’s bank account.

PayPal is also widely accepted on e-commerce platforms as a primary payment method, including online marketplaces, retail, and mobile apps. Many merchants integrate PayPal as a payment option offering customers a trusted and seamless payment experience.

The PayPal platform also provides a mobile app for Apple and Android devices, allowing users to send payments and manage their PayPal accounts on the go. It also supports international transactions offering currency conversion services and handling exchange rate calculations. The Payouts feature also enables a business to send mass payments with PayPal to partners around the globe.

PayPal also offers a range of business solutions and payment processing tools like invoicing, recurring payments, and reporting tools. It offers customizable checkout options and integration with a variety of e-commerce platforms.

What are PayPal’s Top Features for a Business?

When it comes to using PayPal, especially for global partner payments and international business, there are certain features that make the solution stand out from the crowd. Here are a few to consider:

Preferred Top Payment Method

PayPal is often an ideal solution for digitally designed businesses like those in the gig economy and e-commerce. For digital industry partners, it’s one of the top most accepted forms of payment (and is often expected).

PayPal is a preferred payment method to others like paper checks (too costly), ACH payments (only domestic), wire transfers (too risky), and global ACH payments (too complex).

Industry Need

For companies with a digital business model, some form of e-wallet is required. Industry research shows that payees often prefer PayPal, with some operational caveats.

Global Accessibility

For many providers who are ready to participate in the global economy, PayPal provides much-needed access. Many partners in under-banked regions have been able to offer their goods and services because of the ability to accept PayPal payments. Currently, PayPal has over 210 million active users in 156+ markets.

Mass Payments

PayPal Payouts offers a low-cost, mass payments feature that beats out a lot of the competition. US fees are 2% per transaction, capped at $1 per payment for online payments, and $.25 per transaction made via API. International transaction fees are capped based on currency.

There is no charge for the recipient when using PayPal Payouts. Fees are paid by the sender, so payees always receive the full amount. This can be a plus when trying to attract new talent.

Tax Compliance

PayPal has a tax agreement with the IRS in which the payer doesn’t have to send a 1099-MISC form. For recipients who receive more than $20,000 USD and over 200 payments, PayPal will send a special 1099-K form to the government. However, KPMG states a 1042-S must still be filed for foreign payees.

PayPal Pricing & Fees

PayPal fees will vary depending on the type of transaction and the country in which the PayPal account is registered. Generally speaking, expect to pay anywhere from 2.7%-2.9% plus 30 cents per transaction. PayPal’s international transaction fees also apply on top of the base transaction fee. Cross-border fees vary depending on the country and currency involved.

If the payment involves a currency conversion, then PayPal applies a currency conversion fee. The charge is based on the exchange rate at the time of the transaction and may also include a markup over the mid-market exchange rate.

The pricing for PayPal business solutions will also vary and can include monthly fees, transaction fees, and additional costs based on your chosen plan. Costs may also change depending on your account type. PayPal Business accounts pay different rates than personal accounts.

Making a Transfer with PayPal

Sending money is a fairly simple process with PayPal. Just follow these simple steps to make a PayPal transfer:

1. Create a PayPal Account: Visit the website or mobile app and log in or create an account, making sure to connect your bank account, credit card, or debit card.
2. Click on “Send & Request”: On the PayPal dashboard, click on the “Send & Request” button. This will take you to the transfer page.
3. Select the Transfer Type: Choose whether you want to make a payment for goods/services or send money to a partner.
4. Enter Recipient Data: Provide the email address or cell phone number associated with the PayPal account of the recipient. Make sure to enter the correct information to ensure funds go to the right person.
5. Enter Amount and Currency: Enter the exact amount you want to send and select the currency. PayPal will then display any exchange rates or other applicable fees for the currency conversion.
6. Choose Payment Method: Select the funding source you want to use. This can be your PayPal balance, linked bank account, credit card, or debit card. Keep in mind, some funding sources will have additional fees for international transfers.
7. Review and Confirm: Double-check the transfer details, including the amount, recipient data, and current. Review all fees. If everything is correct, click the “Next” button.
8. Add Notes: If you need to include a message or note to accompany the transfer, this is the place to do it. This can help the recipient identify the purpose of the payment. It also labels it in the system for your future records.
9. Complete Transfer: Review the final summary, including final fees with the converted amount in the recipient’s currency. If you’re satisfied with the details, click “Send” to initiate the transfer.
10. Track Payment: PayPal will provide you with a transaction ID and a confirmation message once the transfer is complete. You can access these details and track the status in your PayPal account.

It’s important to note that the fees for sending a PayPal transfer will vary depending on a variety of factors like account type, country, currency, etc. Be sure you always review the final details prior to sending. You should also be aware that PayPal services have certain restrictions and limitations based on local regulations.

Is PayPal Safe?

PayPal is one of the safest payment platforms on the market. They have implemented a variety of safety measures to help protect the personal and financial data of users. The platform uses industry-standard encryption protocols and offers buyer and seller protection programs. In cases of unauthorized payments, these programs may even offer reimbursement or resolution assistance.

PayPal security features include:

• Two-factor authentication (2FA) for an extra layer of protection
• Fraud monitoring with advanced algorithms and tracking tools
• Account protection with security key and account notifications
• Privacy controls with custom preferences

The system also includes complete compliance and regulation capabilities, including AML and KYC.

PayPal Limitations

Although PayPal is one of the top payment platforms in the world, there are still limitations to the technology. Especially when it comes to scaling and engaging in the global economy.

Here are a few PayPal limitations to consider:

High Fees

Although publishers often request PayPal as a payment option, the major drawback comes with the high transfer fees they charge. The payor will typically have to absorb those fees, which some businesses don’t want to do since it increases costs. This can also cause companies to pay affiliates less money, creating more competition for top talent.

Scalability

When you’re a small business, PayPal may seem like the best option. However, the way the fees are structured, it’s not always the best platform to scale your brand. As you make payments over $500 (and if currency conversion is involved), the fees really begin to pile up.

PayPal is also limited to 24 countries for funding currency and requires extra manual efforts, including separate pay files for each currency. Staff will need external financial controls and proactive OFAC SDN verification prior to sending any payments.

A company may need greater flexibility that addresses the needs of global partners while improving efficiency. As you grow, expectations will become greater, and organizations need to offer cheaper solutions.

Partner Retention

There are many reasons why payees may not want to use PayPal. This can affect partner retention, especially if you offer no other payment method.

Some of the main reasons a vendor may reject PayPal include:

• They do not have an existing account
• Their specific region cannot use PayPal
• Foreign exchange fees are involved
• Processing fees reduce revenue
• Payees don’t go to PayPal for support issues

As you can see, cost and convenience are two of the top reasons why a business may want to offer more than just PayPal as a payment method.

Other Limitations

• Integrations and out-of-the-box experience
• No tax collection and validation process
• May not be adequate to remain in compliance with the IRS

PayPal Support

For the most part, the bigger the business, the harder it is to receive attentive customer service. However, PayPal is generally pretty good when it comes to offering effective customer service that satisfies. Here are a few support features PayPal has to offer:

• Help Center: Self-service resource with an FAQ and helpful blogs
• Message Center: Communicate directly with PayPal’s customer support team
• Community Forum: Users can engage with each other and answer questions
• Phone Support: Availability and specific numbers will vary based on location
• Email Support: Contact your support team via email

PayPal also maintains a global presence on social media platforms. While it may not be a primary vehicle for support, you can reach their support team through direct messages on Facebook and Twitter.

Wise vs PayPal: Which is Better for Business? 

While Wise and PayPal are both popular platforms that offer global payment services, it all depends on your specific business needs and requirements. Here are a few common ways to compare them:

Transaction Fees

Wise generally provides more transparency and lower fees compared to PayPal, especially for international transfers. They use mid-market exchange rates and a small fixed fee, while PayPal fees vary depending on multiple factors, like country and currency. PayPal also charges a currency conversion fee.

Winner: Wise

Payment Flexibility

PayPal is widely accepted across online platforms and has a massive customer base. It offers a variety of payment options that include credit cards, bank accounts, and PayPal balances. In contrast, Wise primarily focuses on bank transfers and may not have the same level of acceptance or flexibility as PayPal does.

Winner: PayPal

Withdrawing and Funding

While PayPal offers a seamless experience for withdrawing funds to your bank account, Wise enables you to hold and manage funds in different currencies. This can prove an advantage if you frequently deal with multiple currencies, and want to mitigate exchange rate risks.

Winner: Wise

Integration and Business Tools

PayPal offers a vast range of business tools, including invoicing, shopping cart integration, and payment buttons. The platform is widely integrated with a multitude of e-commerce tools, making it extra convenient for online businesses. Wise, on the other hand, primarily focuses on international money transfers and may have limited business-specific features and integrations.

Winner: PayPal

Use Cases

When it comes to use cases, here is a general guideline:

Use Wise When…

You just need to make international money transfers. It works especially well for SMBs looking for transparent fees, competitive exchange rates, and the ability to send money to different regions worldwide.

Use PayPal When…

PayPal is widely used for online payments, e-commerce transactions, and international transactions. It offers a convenient and trustworthy tool for making online purchases and accepting payments for goods and services. It works best for a business looking for multiple features in a payment processing platform, besides the ability to send money.

Ultimately, if you run a company that manages global transactions on a daily basis, while prioritizing low fees and transparency, Wise may be the suitable choice. If your business focuses on a wide range of payment options and integrations, PayPal is a better fit.

Choosing A Smart Alternative to Wise & PayPal

Still not sure whether Wise or PayPal is the right fit? The good news is, there are other options. Tipalti is one of them.

Tipalti will help a business scale payment automation and offers customers a variety of payment methods (six to be exact) that exceed both Wise and PayPal. The platform offers international payment capabilities, allowing companies to make payments to freelancers, contractors, creators, influencers, publishers, affiliates, suppliers, and more in different countries.

Here are a few reasons why Tipalti may be the best option of all:

Payment Experience

Tipalti provides a white-label payment experience to 196 countries in 120+ currencies, payment threshold options, proactive payment status communications, and an online portal to view payment history. Wise and PayPal both offer limited payment options, in comparison, and fewer currencies. There is also no way to customize the payee experience like you can with Tipalti.

Tax Compliance

Tipalti focuses on compliance and is approved by KPMG. The system automates tax form collection and validation, ensuring accurate and efficient tax reporting. This can be particularly beneficial for companies dealing with complex tax scenarios or managing global payments on a daily basis.

Tax form data collection and validation is part of the built-in Tipalti onboarding workflow. This ensures you are paying a legitimate individual/entity before payment is made. They generate 1099 and 1042-S tax prep files for EOY reporting and collect local/VAT tax IDs in 49 countries, plus offer eFiling integrations and services for your end-of-year tax filing.

Reducing Errors

Tipalti runs a global payment rules engine that scrubs all payment data against 26,000+ rules (by country, payment method, and currency). This can reduce payment errors by 66% or more, saving a business time and money, while improving the payment experience. Other systems, like Wise, require the customer to gather the correct banking details for each country and populate the payment file accordingly.

Payee Management

Tipalti offers robust onboarding and payee management capabilities. It enables a business to collect and validate payee data, including banking details, tax forms, and payment preferences. This helps to streamline the process of adding new partners and maintaining up-to-date contact records.

Top Integrations

When it comes to integrations, Tipalti automates and streamlines the entire payment process, reducing the administrative burden for businesses. The system integrates with a variety of performance marketing systems, accounting software, and ERP platforms to consolidate payment data and simplify workflows.

Additional Benefits of Using Tipalti

• Fee splitting capabilities to incentivize payees to select the safest, most efficient payment methods
• 3-4x more countries, payment methods, and currency options
• Payment tracking and reporting to monitor statuses and review history
• Risk and fraud prevention with verification and validation strategies
• Attentive customer support to address technical difficulties and provide guidance

It’s important to note that the suitability of the payment solution you choose will depend on the specific needs of your business. Not one solution will have everything you need, but some will come very close. And in those cases, you should be comparing features, pricing, and capabilities to help determine the best system that aligns with your payment processing needs.

Summing It Up

When comparing Transferwise vs PayPal, both platforms offer a valuable service for companies seeking an international payment solution.

Wise stands out for its competitive exchange rates, low fees, total transparency, and extensive currency coverage. It provides cost-effective options for sending and receiving money across borders and is an attractive choice for companies with frequent international transactions.

PayPal has established itself worldwide as a trusted payment solution brand, offering a user-friendly and convenient experience. They provide a broad range of services that go beyond cross-border payments, including online shopping, invoicing, and mass payouts. PayPal’s extensive global reach and acceptance rate make it a popular choice for businesses of all sizes.

Tipalti trumps both systems when it comes to tax compliance, currencies, and countries. It’s the prime choice for brands that want to adhere to each country’s regulations, automate global payables, create a self-service payee onboarding experience, reduce errors, and streamline the entire payment workflow.

No matter which solution you choose, it’s crucial to consider specific requirements and priorities. Is your company looking for competitive exchange rates or convenience? Do your payees need help with onboarding?

Ultimately, the decision should be based on factors like the frequency of international transactions, transaction amounts, desired currencies, specific business needs, and the level of support required. Once you have those factors figured out, it should be a piece of cake selecting the best payment solution for your business.

Is your company prepared for long-term success in the gig economy? Read more about it in our latest ebook The Four Industries of Global Partner Payments.